When it comes to forex trading, many traders treat it as if it were a game of chance, which is obviously not a good thing. Forex trading and gambling appear to have a lot in common. In both cases, it is primarily about probability games.
However, the opposite is true because they are diametrically opposed in this regard. Finally, we could argue for hours about whether this is true or false, but let us look at the situation from a practical standpoint. Let us provide some examples to convince you that forex is not a game of chance.
Trading does not usually put traders at such a disadvantage. If the trader proceeds at random and does not analyse the markets, any position he opens has the same chance of making a profit as a loss.
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Thus, unlike roulette, trading does not put the trader at a disadvantage from the start, but the resulting probability of success is ultimately influenced by the traders themselves with their own abilities and skills, which is another significant difference between gambling and trading.
Everyone who has spent time coquetting with gambling has most likely come across the famous French roulette (unlike the American one, which has only one zero on the playing field).
Taking probability theory into account, we find that the playing area consists of 37 numbers (including zero), and the player receives a payout in the ratio of 1:36 (36 times the bet amount) if the number is guessed. A player will always be at a disadvantage in the long run, as he will lose an average of one bet for every 37 rounds played.
One of the most important aspects of blackjack, as well as any other casino game, is that the house always wins in the long run, regardless of how skilled a player is. Although some people will win large sums of money, the total losses will eventually equalise those winnings and tip the balance wheel in favour of the casino.
This is made possible by a “house edge,” which is where the differences between forex and gambling arise. A player must always act first when the first deal is completed. And if they hit a card (request another card from the dealer) and bust, i.e., the card values exceed 21, they lose, even if the house also busts. It’s worth noting that the likelihood of this happening is about 28%.
Another intriguing aspect is that each hand value has a different chance of breaking a player. For example, following a starting hand, a player has a 0% chance of busting if their hand value is 11 or lower.
This chance skyrockets immediately above the threshold of 11: 12 hand value has a 31% probability of busting, whereas 13 hand value has a 39% chance of busting. The likelihood of busting is 92% at 20, and at 21, a player will surely bust by hitting an additional card.
Players can now utilise strategies like doubling down to enhance payouts, dividing the pair, and so on to lessen the house’s odds. However, even if this is done, the house will be in a better situation.
Is forex similar to gambling in reality?
There are some substantial distinctions between these two pursuits, the most important of which is probability.
In forex trading, unlike gambling, there is no “house.” Your market competition is another trader who has his or her own interests. In brief, forex trading is a zero-sum game in which some individuals gain, and some people lose. But, more significantly, the true opponent in this sense is yourself: you must consider before making a decision and not allow greed to get the best of you.
So, what distinguishes forex from gambling is that traders are not passive participants in a process where the market purposely puts them in a worse position. A trader can use numerous tactics and tools to manipulate the odds in their favour and stay ahead of the market and other traders.
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When I walk through the career and evaluate it, I detect gambling components, but it’s largely risk management work. For the bulk of my time in forex, I’ve relied on my talents, profit expectations, and knowledge on how to protect my financial interests. I haven’t approached it haphazardly, as if I were gambling.
As a result, I’ve determined that the answer to the question “is forex gambling?” is embedded in the question itself. Gambling can occur when someone has little knowledge of a profession but is considering how to make a career from it. When you have no understanding and plunge into a new set of regulations for any type of business, you are gambling.
Assume you are summoned to court but do not wish to have a lawyer represent you. You want to defend yourself in front of a court because you’re willing to take a risk despite your lack of legal expertise. This is an extreme example, but when uneducated individuals refer to trading as gambling, they just do not understand what the industry entails.
This is precisely what it sounds like: believing you can foretell and properly forecast market direction. This is gambling since the market prediction is not a viable trade approach. If prediction and probability were feasible, the market would be a very different industry.
Even if you have a method for predicting the market that seems to work most of the time, you are still engaging in forex trading with a touch of gambling.
You solely depend on numbers, which may change at any time. For example, you can claim that you know how to play roulette since you’ve studied and comprehended all of the data. Even yet, sticking to your forecast will result in failure an undetermined number of times.
The third sort of gambling we’ll discuss is holding on to your idea that the market will go in a specific direction based on your preexisting bias. If you don’t offer yourself enough margin for error and go all the way to lose or win in a binary style of thinking, you’re engaging in gambling.
Traders that resist accepting losses or establishing correct stop losses on their transactions may be committing the most serious type of gambling in trading, which can have disastrous consequences for their portfolios. You’ll get into problems if you join the market without a strategy for how much you’re prepared to risk.
As a proprietary forex trading fund manager, I’ve seen far too many traders disregard their own decision to use a reasonable stop loss. Instead, they repeatedly go all the way to a certain loss of portfolio capital and create unachievable recovery points following their losses.
Gambling in this manner is so damaging because it destroys your confidence as you see your transactions eat away at your cash. The lack of achievement and your rage and sorrow at failing will leave you feeling damaged and lacking in self-esteem. In this circumstance, you put a lot on the line and expose yourself to major problems.
Forex trading books - Time to start reading — 2023Avoiding having a trading plan or risk management plan is a milder form of avoiding stop losses. These two techniques should define your trading routine, and failure to implement one or both puts you in the market as a gambler, unfettered by pre-planned strategy and considerations. As a gambler, you are adrift and unprepared.
It’s fairly simple to gamble owing to a lack of education. Return to school to study and practise. In earlier articles, we discussed the significance of effective advice. Allow yourself to be exposed to fresh perspectives, advice from other traders or mentors, and new and improved techniques of learning.
There is also a simple remedy for the locked bias element. Be open and seek confirmation before entering the market. In order to verify or refute your activities, look for confirmation everywhere. Lock your position and then go forward with confidence.
There is no answer for market forecasts since you should never have done it in the first place. Don’t try to anticipate the market since it is unpredictable. There is no method to forecast movements using statistics. If you attempt, you may have a protracted decline before your forecast comes true. Bottom line: don’t make predictions. It is unpredictable. Period.
The hardest part of your mental difficulty when trading may be gambling since you do not have good forex trading money management. Knowing that the expense would be disastrous and cause you grief should be enough of a warning sign for you to avoid this activity.
If you are completely aware of the consequences, you should be more driven to create a comprehensive risk management strategy that is tailored to your trading style. Work on it, fine-tune it and perfect it. Keep it evolving and altering in response to your demands and advancements.
If you do not approach forex professionally, you will eventually treat your trading like gambling. You are merely a gambler if you do not have a trading plan, risk tolerance, and stop-loss. Of course, there are more strategies to boost your chances of success and becoming a lucrative trader over time, but starting with the three factors described above will put you on the right track.
Individual actors can improve their chances of success in both gambling and forex. However, unlike forex, the house will always have the upper hand over the player in gambling. And all of the numerous ways can only lessen that advantage, not fully eliminate it.
